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Invoice Discounting
This is a flexible funding service which initially releases cash against the value of your existing debtor book and then ongoing against the value of new sales completed. This effectively bridges the cash flow gap between the issue of an invoice and your customer paying. Collection of the debts remains in your control and the facility is therefore confidential.
At the commencement of an Invoice Discounting arrangement, which can be set up in as little as one week, an advance will be made against the balance of debts outstanding. The amount advanced is typically 85% of the balance but can be as high as 90%. You would then on an ongoing basis notify the gross amount of all new sales, normally via the internet. The Invoice Discount provider would then make additional funding available. Normally this is done within 24 hours and again is typically at 85% of the value of the new invoices.
When payment for the sales is due your customer will make payment to the Invoice Discount provider, via a dedicated Trust account, who make the residual 15% of the debt available to you less charges.
What does it cost?
Costs will be tailored to the individual size and requirements of your business and will be split between Service Charge and Discounting Charge:-
Service Charge - this is levied to cover the cost of administering the facility and is primarily based on the level of turnover.
Discounting Charge - this is effectively the same as an interest charge and is applied to the amount of money advanced to you. Quite often this will be cheaper than the interest rate charged on similar sized overdraft arrangements.
